Strong demand paired with the shortage of rental properties has caused rental values to increase in most of the UK. What does this mean for the rental market?
Data from London estate agency Hamptons reveals rental growth has increased as stock levels have decreased across Great Britain. Rental growth outside of the capital hit the highest figure on record since Hamptons Lettings Index began in 2012. The average rent of a newly let property outside of London is 8% higher than in February last year. This equates to £68 higher per month.
This strong rental growth has been fuelled by a lack of stock. Since the beginning of the COVID-19 pandemic, 300,000 fewer rental properties have come onto the market. This is almost a third less than during the 12 months prior.
Landlords securing higher rent
The low supply of rental homes has led to half of landlords being able to secure higher rent than they previously achieved. With rental accommodation in high demand, void periods are also falling.
Aneisha Beveridge, head of research at Hamptons, says: “This year we’ve seen a sharp decline in the number of rental homes coming onto the market. Would-be tenants are now faced with significantly less choice, which in turn is pushing up rents. And with many landlords having multiple offers on the table, half of investors have been able to increase the rent they charge.”
Over the past few months, there has been a rise in landlords purchasing property. There has also been an increase in first-time landlords entering the buy-to-let sector. Many have been enticed by the stamp duty holiday and low interest rates.
This will likely continue with the extension and tapering end to the stamp duty holiday. Because of this, more rental properties will likely come forward to the rental market once more of those sales complete. This could help keep up with the growing demand for rental accommodation.
Rental growth on a regional level
According to the research by Hamptons, the south-east and south-west of England have seen the strongest rental growth with 10.6% and 9.2% year-on-year increases to rental values. The north follows with rents having increased by 6.8%.
As both landlords and tenants can usually get more for their money in the north, the region is expected to be appealing for both parties. This is especially the case as many people are searching for more space after successive lockdowns and with the rise of working from home.
London’s rental market
In the past year, London’s rental market hasn’t fared as well as the rest of the UK. Inner London saw rental values drop by a whopping 17.7%, according to Hamptons. Greater London also saw rents decrease but only by 0.2%. However, Outer London has seen growth with rents increasing there by an average of 5.3%.
Additional research by estate and lettings agency Portico reveals landlords are seeing particularly strong yields in areas of East London. Barking has the best rental yield in the capital with 5.9%. This neighbourhood even has one of the lowest median house prices across Greater London. Upney and Wall End, both of which are also in East London, followed closely behind with 5.8% rental yields.
This further shows how key location is with the success of buy-to-let investment. And it is particularly important as new rental trends have been revealed. Many tenants have changed their property priorities, including location preferences, in the wake of COVID-19.
Robert Nichols, CEO of Portico, comments: “Our research shows that there are still healthy rental yields to be found in London – if you know where to look. Outer London areas are actually seeing rent increases between 1-3% as tenants – now spending a lot more time at home – migrate from more central areas to the suburbs looking for more space.”